Question

Assume Jana has lost some market share due to competition, and she’s having trouble covering her costs. Also assume that donuts are a good with elastic demand in your market. Jana has asked you if she should raise or lower prices to increase total revenues. Jana should .

Answer 1

Jana shoul lower the prices as the donuts have an elastic demand

Step-by-step explanation:

An small variation in the price causes a more than proportional change in the quantity demanded so it will increase the revenues, but has to be careful not to put the price below the variable cost as she’s having trouble covering her costs.